Practice%20Test%20II - Accounting 4283 Practice Test II...

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Accounting 4283 Practice Test II Fall 2007 1. Which of the following describes defined benefit pension plans? A) The investment risk is borne by the employee. B) The plans are simple and easy to construct. C) The investment risk is borne by the employer. D) Retirement benefits depend on the individual's account balance. 2. The PBO is increased by: A) An increase in the average life expectancy of employees. B) Amortization of prior service cost. C) An increase in the actuary's assumed discount rate. D) A return on plan assets that is lower than expected. 3. Interest cost is calculated by multiplying the: A) ABO by the expected return on the plan assets. B) ABO by the discount rate. C) PBO by the expected return on plan assets. D) PBO by the discount rate. 4. The accounting for defined contribution pension plans is easy because each year: A) The employer records pension expense equal to the amount paid out to retirees. B) The employer records pension expense based on an amount provided by the actuary. C) The employer records pension expense equal to the annual contribution. D) The employer records pension expense based on the earnings of the plan assets. 5. To help assess the uncertainties that surround a defined benefit pension plan, corporations frequently hire a(n): A) CPA. Page 1
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B) Attorney. C) Investment analyst. D) Actuary. 6. Which of the following is a correct statement concerning the reporting of the pension plan on the face of the balance sheet? A) Only the plan assets are reported. B) Only the PBO is reported. C) Both the PBO and the plan assets are reported. D) Neither the PBO nor the plan assets is reported. 7. The pension expense includes periodic changes that occur: A) In the PBO. B) In the PBO and the plan assets. C) In the plan assets. D) In the PBO and the ABO. 8. Which of the following is not a way of measuring the pension obligation? A) Accumulated benefit obligation. B) Vested benefit obligation. C) Retiree benefit obligation. D) Projected benefit obligation. 9. Interest cost will: A) Increase the PBO and increase pension expense. B) Increase pension expense and reduce plan assets. C) Increase the PBO and reduce plan assets. D) Increase pension expense and reduce the return on plan assets. 10. Which of the following is true? A) A projected benefits approach is used to determine the periodic pension expense.
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